The NuPress Valet Co. has an improved version of its hotel stand. The investment cost is...

The NuPress Valet Co. has an improved version of its hotel stand. The investment cost is expected to be $72 million and will return $13.5 million for 5 years in net cash flows. The ratio of debt to equity is 1 to 1. The cost of equity is 13%, the cost of debt is 9%, and the tax rate is 34%. The appropriate discount rate, assuming average risk, is:

	9%
	9.47%
	8.65%
	13%
	10.5%

Expert Solution

Answer: c

Feedback: WACC = .09(1-.34)(.5) + .13(.5) = .0297 + .065 = .0947 = 9.47%

jeff jeffy answered 3 years ago

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